Question: Bantify is considering spending $29,000 at Time 0 to test a new product. Depending on the test results, the firm may decide to spend $64,000

Bantify is considering spending $29,000 at Time 0 to test a new product. Depending on the test results, the firm may decide to spend $64,000 at Time 1 to start production. If the product is introduced and it is successful, it will produce aftertax cash flows of $48,000 a year for Years 2 through 4. If it is unsuccessful, there will be no cash flow in Year 1, after which the project will be terminated. There are no recovery costs at the end of Year 4. The probability of a successful test and investment is 58 percent. What is the net present value at Time 0 given a discount rate of 16 percent?

Multiple Choice

$3,594.43
$1,133.15
$7,098.65
$5,881.15
$8,407.70

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

The management team of Wickersham Brothers Incorporated is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative...

1. Tall Tree Timber has annual net income of $213,640 and 72,000 shares of stock outstanding. Big Trees is a similar firm with similar growth opportunities that has 75,000 shares of stock outstanding...

Bantify is considering spending $29,000 at Time O to test a new product. Depending on the test results, the firm may decide to spend $64,000 at Time 1 to start production. If the product is...

I wanted to ask a question regarding questions 12 and 13, under section 16.4 of the file I uploaded. In question 12, we had to calculate the value of the firm without leverage. In question 13 we had...

William's Co. is considering spending $14871 at Time 0 to test a new product. Depending on the test results, the firm may decide to spend $57734 at Time 1 to start production of the product. If the...

Explain how does the option "Do Nothing" would affect CFS based on all relevant Organizational Design concepts. Why is it the least appropriate option to take for CFS as an organization. Ensure your...

1. In addition to the option of 'Do Nothing', identify two (2) other options Renee should consider for how to respond to this scenario. For all three (3) options explain how CFS would be affected...

1. Southern Goods is analyzing a proposed project using standard sensitivity analysis. The company expects to sell 4,500 units, which may increase or decrease by 11 percent under optimistic or...

Look at Kool-Times graph of actual and budgeted monthly costs in Exhibit 10-5. 1. How many pools did Kool-Time install in May? 2. How much were Kool-Times actual expenses in May? 3. Using Kool-Times...

Data by itself is not useful unless itis -----------------------------. A. massive B. processed to obtain information C. collected from multiple resources D. poorly stated

Current Altempt in Progreis Bramble Cora produces a product that requires 2 . 6 0 pounds of materials per unit. The allow ance for waste and spoilage per unit is prodaction time is 1 hour ger unit,...

Find the moment about ( 2 , 1 , - 3 ) of the force F = 2 i - 3 j + k which passes through ( 1 , - 1 , 2 ) . ( Force in newtons, distances in metres ) .

LO3.1 Characterize and give examples of markets.

5. What problem does barter entail? Indicate the economic significance of money as a medium of exchange. What is meant by the statement We want money only to part with it? LO2.2

11. Distinguish between the resource market and the product market in the circular flow model. In what way are businesses and households both sellers and buyers in this model? What are the flows in...